2015 (3) TMI 1208 - AT - Income Tax

Validity of assessment against non existent entity - Held that - The assessee, viz Eicher International Limited was incorporated under the Companies Act, 1956 on 09.03.1994. vide scheme of amalgamation u/s 391 to 394 of the Companies Act, 1956, the assessee merged with Eicher Goodearth Ltd. vide order of the Delhi High Court, dated 06.07.2006, with effect from the appointed date viz 1st April, 2005. And in terms of the said order, a certified copy of the order of the Hon ble Delhi High Court was filed with the Registrar of Companies on 08.08.2006. the copy of the order of the Delhi High Court was accordingly taken on record by the Registrar of Companies. In the aforesaid scenario the assessee was not an existing legal entity w.e.f 1st April 2005 when the assessment order was passed by the AO on 31.10.2006, so the assessment order is a nullity in the eyes of law and so is void. Therefore we quash the impugned order passed by the AO on 31.102006 and so the additional ground allowed in favour of assessee. 10. Since we have quashed the assessment proceedings we are not inclined to adjudicate other grounds raised by the assessee and the revenue being academic.

Summary

Issues involved:
Cross-appeals by assessee and revenue against CIT(A) order for Assessment Year 2004-05. Additional ground raised regarding assessment order jurisdiction due to non-existent entity post-merger. Admissibility of legal ground raised for the first time. Validity of assessment order against non-existent entity.

Analysis:

1. Admissibility of additional ground: The assessee raised an additional ground before the ITAT regarding the assessment order's jurisdiction due to the non-existence of the entity post-merger. The CIT(A) did not adjudicate on this ground as it was not pressed. The ITAT admitted the legal ground for consideration based on precedents allowing questions of law raised for the first time to be adjudicated.

2. Validity of assessment order: The ITAT considered the issue of whether the assessment order against a non-existent entity post-merger was valid. The assessee contended that the company had merged with another entity as per the Delhi High Court order. Citing relevant case law, the ITAT held that once a company is dissolved post-merger, any action in its name is void. The assessment order against the non-existent entity was deemed null and void in the eyes of the law.

3. Merger and legal entity status: The ITAT noted that the assessee company had merged with another entity as per the Companies Act, 1956, and the Delhi High Court order. The merger resulted in the dissolution of the assessee company as a legal entity from 1st April 2005. As the assessment order was passed after this date, it was considered a nullity. The ITAT quashed the assessment order based on the legal status of the entity post-merger.

4. Outcome and decision: Due to the quashing of the assessment proceedings, the ITAT did not adjudicate on other grounds raised by both the assessee and the revenue, deeming them academic. The appeal of the assessee was allowed, and the revenue's appeal was dismissed based on the invalidity of the assessment order against a non-existent entity post-merger. The ITAT pronounced the order in favor of the assessee on 4th March 2015.